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Deck 18: Decision Analysis
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Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
Which of the following decisions has the best average payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Below is a payoff table that lists four mortgage options:
Which of the following decisions has the best average payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Question
Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 5-year ARM?
A)$ 49,514
B)$ 52,015
C)$ 53,395
D)$ 51,641
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 5-year ARM?
A)$ 49,514
B)$ 52,015
C)$ 53,395
D)$ 51,641
Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
A(n)________ is also called a minimax regret strategy.
A)opportunity-loss strategy
B)aggressive strategy
C)conservative strategy
D)average payoff strategy
Below is a payoff table that lists four mortgage options:
A(n)________ is also called a minimax regret strategy.
A)opportunity-loss strategy
B)aggressive strategy
C)conservative strategy
D)average payoff strategy
Question
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
![<strong>Use the information below to answer the following question(s). Below is a decision tree illustrating the R&D process for a new drug. Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million. What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]</strong> A)$ 119.0 B)$ 116.1 C)$ 105.7 D)$ 94.4 <div style=padding-top: 35px>](https://storage.examlex.com/TB3611/11ea30b2_9220_8cd3_b0fd_07129c41a8a0_TB3611_00_TB3611_00_TB3611_00_TB3611_00_TB3611_00_TB3611_00.jpg)
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
![<strong>Use the information below to answer the following question(s). Below is a decision tree illustrating the R&D process for a new drug. Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million. What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]</strong> A)$ 119.0 B)$ 116.1 C)$ 105.7 D)$ 94.4 <div style=padding-top: 35px>](https://storage.examlex.com/TB3611/11ea30b2_9220_8cd4_b0fd_f9bc14d36d69_TB3611_00_TB3611_00_TB3611_00_TB3611_00_TB3611_00_TB3611_00.jpg)
What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Question
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff of the 5-year ARM?
A)$ 17,872.90
B)$ 53,618.60
C)$ 48,805.20
D)$ 20,081.80
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff of the 5-year ARM?
A)$ 17,872.90
B)$ 53,618.60
C)$ 48,805.20
D)$ 20,081.80
Question
Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 5-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 5-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Question
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following decisions has the largest expected payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following decisions has the largest expected payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 3-year ARM?
A)$ 52,792
B)$ 45,212
C)$ 51,094
D)$ 55,278
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 3-year ARM?
A)$ 52,792
B)$ 45,212
C)$ 51,094
D)$ 55,278
Question
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Question
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff for the 1-year ARM?
A)$ 53,082.00
B)$ 16,951.00
C)$ 56,938.00
D)$ 18,979.30
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff for the 1-year ARM?
A)$ 53,082.00
B)$ 16,951.00
C)$ 56,938.00
D)$ 18,979.30
Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the best payoff rate for the 1-year ARM?
A)$ 49,618
B)$ 43,650
C)$ 38,560
D)$ 66,645
Below is a payoff table that lists four mortgage options:
What is the best payoff rate for the 1-year ARM?
A)$ 49,618
B)$ 43,650
C)$ 38,560
D)$ 66,645
Question
Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 2-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 2-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the worst payoff rate for the 5-year ARM?
A)$ 50,894
B)$ 48,134
C)$ 51,641
D)$ 55,895
Below is a payoff table that lists four mortgage options:
What is the worst payoff rate for the 5-year ARM?
A)$ 50,894
B)$ 48,134
C)$ 51,641
D)$ 55,895
Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the worst expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the worst expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Question
Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 25-year fixed decision?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 25-year fixed decision?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Question
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of mode obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of mode obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Question
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Question
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Question
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Question
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 1-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 1-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Question
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
The expected value of sample information (EVSI)is equal to the ________.
A)EMV without sample information divided by the EMV with sample information
B)EMV without sample information minus the EMV with sample information
C)sum of the EMV with sample information and the EMV without sample information
D)EMV with sample information minus the EMV without sample information
Below is a payoff table with three mortgage options:
The expected value of sample information (EVSI)is equal to the ________.
A)EMV without sample information divided by the EMV with sample information
B)EMV without sample information minus the EMV with sample information
C)sum of the EMV with sample information and the EMV without sample information
D)EMV with sample information minus the EMV without sample information
Question
Use the information below to answer the following question(s).
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
The expected value of perfect information (EVPI)is equal to the ________.
A)EMV with perfect information minus the EMV without any information
B)EMV with perfect information divided by the EMV without any information
C)sum of the EMV with information and the EMV without any information
D)EMV without any information minus the EMV with perfect information
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
The expected value of perfect information (EVPI)is equal to the ________.
A)EMV with perfect information minus the EMV without any information
B)EMV with perfect information divided by the EMV without any information
C)sum of the EMV with information and the EMV without any information
D)EMV without any information minus the EMV with perfect information
Question
Question
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 30-year fixed decision?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 30-year fixed decision?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Question
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Which of the following is the average utility for the bond fund decision?
A)1)18
B)0)38
C)0)54
D)0)43
Below are four options for an investment decision.
Which of the following is the average utility for the bond fund decision?
A)1)18
B)0)38
C)0)54
D)0)43
Question
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Which of the following formulas is used to determine the exponential utility function?
A)U(x)= 1 + e-ˣ/ᴿ
B)U(x)= 1× eˣ/ᴿ
C)U(x)= 1/ eˣᴿ
D)U(x)= 1 - e-ˣ/ᴿ
Below are four options for an investment decision.
Which of the following formulas is used to determine the exponential utility function?
A)U(x)= 1 + e-ˣ/ᴿ
B)U(x)= 1× eˣ/ᴿ
C)U(x)= 1/ eˣᴿ
D)U(x)= 1 - e-ˣ/ᴿ
Question
Use the information below to answer the following question(s).
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
What is the expected value of the ticket when a discount is offered on the full fare? [Hint: Choose the approximate value.]
A)$ 442.50
B)$ 472.00
C)$ 410.00
D)$ 501.50
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
What is the expected value of the ticket when a discount is offered on the full fare? [Hint: Choose the approximate value.]
A)$ 442.50
B)$ 472.00
C)$ 410.00
D)$ 501.50
Question
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the best decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the best decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
Question
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the coefficient of variation obtained from the simulation results? [Hint: Choose the approximate value.]
A)1)587
B)1)126
C)2)015
D)1)890
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the coefficient of variation obtained from the simulation results? [Hint: Choose the approximate value.]
A)1)587
B)1)126
C)2)015
D)1)890
Question
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the probability that the drug will not reach the market? [Hint: Choose the approximate value.]
A)0)95
B)0)89
C)0)77
D)0)82
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the probability that the drug will not reach the market? [Hint: Choose the approximate value.]
A)0)95
B)0)89
C)0)77
D)0)82
Question
Use the information below to answer the following question(s).
Below are four options for an investment decision.
If the payoff is $2200 and R is equal to $500, what is the utility function?
A)0)9877
B)0)6819
C)0)7645
D)0)4502
Below are four options for an investment decision.
If the payoff is $2200 and R is equal to $500, what is the utility function?
A)0)9877
B)0)6819
C)0)7645
D)0)4502
Question
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 3-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 3-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Question
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Identify the average utility for the growth fund decision.
A)1)05
B)0)70
C)0)20
D)0)60
Below are four options for an investment decision.
Identify the average utility for the growth fund decision.
A)1)05
B)0)70
C)0)20
D)0)60
Question
Question
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the worst decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the worst decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
Question
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Which of the following is the average utility for the index fund decision?
A)1)05
B)0)70
C)0)60
D)0)45
Below are four options for an investment decision.
Which of the following is the average utility for the index fund decision?
A)1)05
B)0)70
C)0)60
D)0)45
Question
Question
Question
Use the information below to answer the following question(s).
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?
A)$ 442.50
B)$ 472.00
C)$ 501.50
D)$ 531.00
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?
A)$ 442.50
B)$ 472.00
C)$ 501.50
D)$ 531.00
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Deck 18: Decision Analysis
1
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
Which of the following decisions has the best average payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Below is a payoff table that lists four mortgage options:
Which of the following decisions has the best average payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
A
2
A(n)________ is a matrix whose rows correspond to decisions and whose columns correspond to events.
A)decision tree model
B)payoff table
C)utility function table
D)scoring model
A)decision tree model
B)payoff table
C)utility function table
D)scoring model
B
3
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 5-year ARM?
A)$ 49,514
B)$ 52,015
C)$ 53,395
D)$ 51,641
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 5-year ARM?
A)$ 49,514
B)$ 52,015
C)$ 53,395
D)$ 51,641
D
4
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
A(n)________ is also called a minimax regret strategy.
A)opportunity-loss strategy
B)aggressive strategy
C)conservative strategy
D)average payoff strategy
Below is a payoff table that lists four mortgage options:
A(n)________ is also called a minimax regret strategy.
A)opportunity-loss strategy
B)aggressive strategy
C)conservative strategy
D)average payoff strategy
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5
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of mean obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
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6
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff of the 5-year ARM?
A)$ 17,872.90
B)$ 53,618.60
C)$ 48,805.20
D)$ 20,081.80
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff of the 5-year ARM?
A)$ 17,872.90
B)$ 53,618.60
C)$ 48,805.20
D)$ 20,081.80
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7
Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 5-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 5-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
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8
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following decisions has the largest expected payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following decisions has the largest expected payoff?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
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9
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 3-year ARM?
A)$ 52,792
B)$ 45,212
C)$ 51,094
D)$ 55,278
Below is a payoff table that lists four mortgage options:
What is the average payoff for the 3-year ARM?
A)$ 52,792
B)$ 45,212
C)$ 51,094
D)$ 55,278
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10
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of standard deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
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11
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff for the 1-year ARM?
A)$ 53,082.00
B)$ 16,951.00
C)$ 56,938.00
D)$ 18,979.30
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
What is the expected payoff for the 1-year ARM?
A)$ 53,082.00
B)$ 16,951.00
C)$ 56,938.00
D)$ 18,979.30
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12
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the best payoff rate for the 1-year ARM?
A)$ 49,618
B)$ 43,650
C)$ 38,560
D)$ 66,645
Below is a payoff table that lists four mortgage options:
What is the best payoff rate for the 1-year ARM?
A)$ 49,618
B)$ 43,650
C)$ 38,560
D)$ 66,645
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13
Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 2-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 2-year ARM?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
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14
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
What is the worst payoff rate for the 5-year ARM?
A)$ 50,894
B)$ 48,134
C)$ 51,641
D)$ 55,895
Below is a payoff table that lists four mortgage options:
What is the worst payoff rate for the 5-year ARM?
A)$ 50,894
B)$ 48,134
C)$ 51,641
D)$ 55,895
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15
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the worst expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the worst expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
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16
Use the information given below to answer the following question(s).
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 25-year fixed decision?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
Below is a payoff table that lists three mortgage options:
What is the maximum opportunity loss incurred for the 25-year fixed decision?
A)$ 8,626
B)$ 13,716
C)$ 14,369
D)$ 10,581
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17
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of mode obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the value of mode obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
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18
Use the information below to answer the following question(s).
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
The payoff table given below lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
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19
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the mean absolute deviation obtained from the simulation results? [Hint: Choose the approximate value.]
A)$ 119.0
B)$ 116.1
C)$ 105.7
D)$ 94.4
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20
Use the information below to answer the following question(s).
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
Below is a payoff table that lists four mortgage options:
The probability of rates rising is 0.6, rates stable is 0.3, and rates falling is 0.1.Answer the following questions by creating a decision tree.
Which of the following is considered the best expected value decision?
A)1-year ARM
B)3-year ARM
C)5-year ARM
D)30-year fixed
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21
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 1-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 1-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
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22
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
The expected value of sample information (EVSI)is equal to the ________.
A)EMV without sample information divided by the EMV with sample information
B)EMV without sample information minus the EMV with sample information
C)sum of the EMV with sample information and the EMV without sample information
D)EMV with sample information minus the EMV without sample information
Below is a payoff table with three mortgage options:
The expected value of sample information (EVSI)is equal to the ________.
A)EMV without sample information divided by the EMV with sample information
B)EMV without sample information minus the EMV with sample information
C)sum of the EMV with sample information and the EMV without sample information
D)EMV with sample information minus the EMV without sample information
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23
Use the information below to answer the following question(s).
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
The expected value of perfect information (EVPI)is equal to the ________.
A)EMV with perfect information minus the EMV without any information
B)EMV with perfect information divided by the EMV without any information
C)sum of the EMV with information and the EMV without any information
D)EMV without any information minus the EMV with perfect information
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
The expected value of perfect information (EVPI)is equal to the ________.
A)EMV with perfect information minus the EMV without any information
B)EMV with perfect information divided by the EMV without any information
C)sum of the EMV with information and the EMV without any information
D)EMV without any information minus the EMV with perfect information
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24
Use the information below to answer the following question(s)
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
If the marketing report is unfavorable, what is the probability of low demand?
A)84%
B)90%
C)87%
D)80%
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
If the marketing report is unfavorable, what is the probability of low demand?
A)84%
B)90%
C)87%
D)80%
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25
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 30-year fixed decision?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 30-year fixed decision?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
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26
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Which of the following is the average utility for the bond fund decision?
A)1)18
B)0)38
C)0)54
D)0)43
Below are four options for an investment decision.
Which of the following is the average utility for the bond fund decision?
A)1)18
B)0)38
C)0)54
D)0)43
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27
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Which of the following formulas is used to determine the exponential utility function?
A)U(x)= 1 + e-ˣ/ᴿ
B)U(x)= 1× eˣ/ᴿ
C)U(x)= 1/ eˣᴿ
D)U(x)= 1 - e-ˣ/ᴿ
Below are four options for an investment decision.
Which of the following formulas is used to determine the exponential utility function?
A)U(x)= 1 + e-ˣ/ᴿ
B)U(x)= 1× eˣ/ᴿ
C)U(x)= 1/ eˣᴿ
D)U(x)= 1 - e-ˣ/ᴿ
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28
Use the information below to answer the following question(s).
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
What is the expected value of the ticket when a discount is offered on the full fare? [Hint: Choose the approximate value.]
A)$ 442.50
B)$ 472.00
C)$ 410.00
D)$ 501.50
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
What is the expected value of the ticket when a discount is offered on the full fare? [Hint: Choose the approximate value.]
A)$ 442.50
B)$ 472.00
C)$ 410.00
D)$ 501.50
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29
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the best decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the best decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
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30
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the coefficient of variation obtained from the simulation results? [Hint: Choose the approximate value.]
A)1)587
B)1)126
C)2)015
D)1)890
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the coefficient of variation obtained from the simulation results? [Hint: Choose the approximate value.]
A)1)587
B)1)126
C)2)015
D)1)890
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31
Use the information below to answer the following question(s).
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the probability that the drug will not reach the market? [Hint: Choose the approximate value.]
A)0)95
B)0)89
C)0)77
D)0)82
Below is a decision tree illustrating the R&D process for a new drug.
Let us assume that if the market is large, the payoff is lognormally distributed with a mean of $ 4,900 million and a standard deviation of $ 1,000 million; if the market is medium, the payoff is lognormally distributed with a mean of $2,500 million and a standard deviation of $500 million; and if the market is small, the payoff is normally distributed with a mean of $1,800 million and standard deviation of $200 million.
What is the probability that the drug will not reach the market? [Hint: Choose the approximate value.]
A)0)95
B)0)89
C)0)77
D)0)82
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32
Use the information below to answer the following question(s).
Below are four options for an investment decision.
If the payoff is $2200 and R is equal to $500, what is the utility function?
A)0)9877
B)0)6819
C)0)7645
D)0)4502
Below are four options for an investment decision.
If the payoff is $2200 and R is equal to $500, what is the utility function?
A)0)9877
B)0)6819
C)0)7645
D)0)4502
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33
Use the below information to answer the following question(s).
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 3-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
Below is a payoff table with three mortgage options:
What is the expected opportunity loss for the 3-year ARM?
A)$ 7,979.60
B)$ 3,959.40
C)$ 6,853.50
D)$ 8,621.40
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34
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Identify the average utility for the growth fund decision.
A)1)05
B)0)70
C)0)20
D)0)60
Below are four options for an investment decision.
Identify the average utility for the growth fund decision.
A)1)05
B)0)70
C)0)20
D)0)60
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35
Use the information below to answer the following question(s)
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
What is the likelihood for high demand knowing that the market report is favorable?
A)84%
B)90%
C)87%
D)80%
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
What is the likelihood for high demand knowing that the market report is favorable?
A)84%
B)90%
C)87%
D)80%
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Unlock Deck
k this deck
36
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the worst decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
Below are four options for an investment decision.
Based on the average utility, which of the following is considered the worst decision?
A)bank CD
B)bond fund
C)index fund
D)growth fund
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Unlock Deck
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37
Use the information below to answer the following question(s).
Below are four options for an investment decision.
Which of the following is the average utility for the index fund decision?
A)1)05
B)0)70
C)0)60
D)0)45
Below are four options for an investment decision.
Which of the following is the average utility for the index fund decision?
A)1)05
B)0)70
C)0)60
D)0)45
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38
Use the information below to answer the following question(s)
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
A children's welfare fundraiser involves selling one thousand $70 tickets to win a $20,000 grand prize.If the probability of winning is only 0.005, what is the expected payoff?
A)-$40
B)-$50
C)$30
D)$60
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
A children's welfare fundraiser involves selling one thousand $70 tickets to win a $20,000 grand prize.If the probability of winning is only 0.005, what is the expected payoff?
A)-$40
B)-$50
C)$30
D)$60
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39
Use the information below to answer the following question(s)
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
Greg is indifferent between receiving $2,000 and taking a chance at $2,500 with probability 0.7 and losing $1200 with probability 0.5.What is the expected value of this gamble?
A)$ 1,150
B)$ 1,800
C)$ 1,460
D)$ 2,045
Misty Inc.launches a new range of perfumes for men and women.The probability of high consumer demand for the product is 0.6 and low consumer demand is 0.4.The probability of a favorable survey response given high consumer demand is 0.9 and the probability of a favorable survey response given low consumer demand is 0.2.
Greg is indifferent between receiving $2,000 and taking a chance at $2,500 with probability 0.7 and losing $1200 with probability 0.5.What is the expected value of this gamble?
A)$ 1,150
B)$ 1,800
C)$ 1,460
D)$ 2,045
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40
Use the information below to answer the following question(s).
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?
A)$ 442.50
B)$ 472.00
C)$ 501.50
D)$ 531.00
Below is a decision tree for the airline revenue management.
Create a one-way table and answer the following questions.
If the probability of selling the full-fare ticket is 0.80, what is the expected value of the ticket?
A)$ 442.50
B)$ 472.00
C)$ 501.50
D)$ 531.00
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41
For the average payoff strategy, the decision with the best average payoff is chosen.
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42
In a minimin strategy, the decision which minimizes the minimum payoff is chosen.
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43
A payoff table is a matrix whose rows correspond to events and whose columns correspond to decisions.
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44
What is the expected value of sample information?
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45
The average payoff strategy weights the likelihood that the actual outcomes can occur.
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46
An outcome over which the decision maker has complete control is called an event node.
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47
What is the expected value of perfect information?
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48
What are the three elements required to characterize decisions with uncertain consequences?
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49
Describe the steps involved in the construction of a decision tree.
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50
What are the differences between an aggressive strategy and a conservative strategy?
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